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HomeMy WebLinkAbout2025-01-28 - AGENDA REPORTS - ATIVO SENIOR LIVING TEFRA HEARINGO Agenda Item: 1 CITY OF SANTA CLARITA AGENDA REPORT PUBLIC HEARINGS CITY MANAGER APPROVAL: Li ' DATE: January 28, 2025 SUBJECT: ATIVO SENIOR LIVING OF SANTA CLARITA TAX EQUITY AND FISCAL RESPONSIBILITY ACT (TEFRA) HEARING DEPARTMENT: Administrative Services PRESENTER: Amy Seyerle RECOMMENDED ACTION City Council conduct a public hearing and adopt a Tax Equity and Financial Responsibility Act resolution approving the issuance of tax-exempt obligations by the California Public Finance Authority in an aggregate principal amount not to exceed $130 million and by Arizona Industrial Development Authority in an aggregate principal amount not to exceed $170 million to finance or reimburse the acquisition and construction costs by ISF Ativo Holdings LLC of a 140-bed rental senior living community. BACKGROUND The California Public Finance Authority (CalPFA) is a joint exercise of powers authority created under the California Joint Powers Authority Act for the purpose of issuing tax-exempt and taxable conduit bonds for public and private entities throughout California. The California Public Finance Authority is empowered to promote economic, cultural, and community development opportunities that create temporary and permanent jobs, affordable housing, community infrastructure, and improve the overall quality of life in local communities. They issue bonds on behalf of their members, which includes the City of Santa Clarita (City), and to nonprofit and private entities within the members' geographical jurisdictions where public benefit projects are proposed to be located. Section 147(f) of the Internal Revenue Code of 1986 requires that, in order for the interest on such tax-exempt conduit bonds to be excluded from gross income to investors for federal income tax purposes, the applicable elected representatives of the host governmental unit must approve the issuance of such bonds. This hearing and approval process is referred to as a "TEFRA" hearing, after the Tax Equity and Fiscal Responsibility Act of 1983, the regulations for which were promulgated under the Tax Code changes of 1986. Page 1 Packet Pg. 7 O The City received a request to conduct a TEFRA public hearing under and in accordance with Section 147(f) of the Internal Revenue Code, in order for (a) Ca1PFA to issue tax-exempt revenue bonds (California Bonds) in an aggregate principal amount not to exceed $130 million and (b) the Arizona Industrial Development Authority (AZIDA) to issue tax-exempt bonds (Arizona Bonds, and together with California Bonds, the Bonds) in an aggregate principal amount of $170 million, of which all of the California Bonds and $20 million of the Arizona Bonds will be issued on behalf of ISF Ativo Holdings LLC (Borrower) the sole member of which is Integrated Senior Foundation, a 501(c)(3) organization. The Arizona Industrial Development Authority is a nonprofit corporation and political subdivision of the State of Arizona. The Arizona Industrial Development Authority is a conduit issuer of municipal revenue bonds with the ability to assist private and public borrowers across the country. The AZIDA was created pursuant to A.R.S. §35-701 — 733 and is empowered to issue its bonds to provide funds for the financing or refinancing of the costs of the acquisition, construction, improvement, equipping or operating of a "project," as defined in the AZIDA statute, such as the senior living project referenced below. The proceeds from the sale of the Bonds will be loaned to the Borrower and used to finance or reimburse the costs of acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, and/or equipping of a 140-bed independent living, assisted living and memory care community for residents who are age 65 or older at 16330 Village Way, Santa Clarita, to be known as Ativo Senior Living of Santa Clarita (Facility). This new construction project is part of the Sand Canyon Plaza Mixed Use Project (Master Case 14-077), which was approved by the City Council on September 12, 2017, with a revision by the City Council on December 12, 2023. The primary financing for the Facility will be through the issuance of bonds by CalPFA. The financing of the Facility is happening concurrently with the financing of two other facilities in Arizona. As such, bonds will be issued through AZIDA for the two Arizona facilities. There is a possibility, due to financial considerations, that a small portion of subordinate bonds issued through AZIDA will be used for the Facility. If that is the case, the TEFRA documents also reference the AZIDA issuance. The Bonds would be tax-exempt private activity bonds for purposes of the Internal Revenue Code and, as such, require the approval of the elected body of the governmental entity having jurisdiction over the area where the Facility to be financed is located. The approval and adoption of the resolution authorizing the issuance of the Bonds will not require the City to be financially obligated, liable, or provide any financing for the Facility. The City's credit and bond ratings are not at risk by adopting this resolution and no City revenues are at risk by this bond issuance. In order for Ca1PFA and/or AZIDA to issue such Bonds, the City must (1) conduct a public hearing allowing members of the public to comment on the proposed Facility and the Bonds, and (2) approve the CalPFA's and AZIDA's issuance of Bonds on behalf of the Borrower for the proposed financing. Although the Ca1PFA and AZIDA, as applicable, not the City, will be the issuer of the tax-exempt revenue bonds for the Facility, the financing cannot proceed without the City, as the governmental entity having jurisdiction over the site, approving the Bonds. For this item, the Borrower selected Ca1PFA and AZIDA as the financing agencies. As a result Page 2 Packet Pg. 8 O of the Borrower selecting CaIPFA, the City will receive a positive fiscal impact from CaIPFA's Community Benefit Program. This program provides for 15 percent of the annual administrative fee paid by the Borrower to be allocated to the City, which is an amount of up to $2,925 anticipated in year one, reducing to zero as the bonds are paid down. The annual amount received by the City is contingent upon the principal amount after issuance. Participation by the City will not impact the City's appropriations limits or constitute any type of indebtedness by the City. Once the City holds the required public hearing and adopts the required resolution following the public hearing, no other participation of the City in the actions of the CaIPFA or in the financing will be required. Approval pursuant to this resolution does not constitute any other approval by any commission or agency of the City with respect to any other City regulatory or other requirements, such as building permits, in connection with the Facility. ALTERNATIVE ACTION Other action as determined by the City Council. FISCAL IMPACT The City is to receive on an annual basis, over the anticipated 35-year life of the California Bonds, 15 percent of the administrative fee that ISF Ativo Holdings LLC pays to CaIPFA annually. Since the administrative fee is 1.5 basis points or .015 percent of the outstanding bond principal, the City is estimated to receive an amount of up to $2,925 in year one, reducing annually as the bonds are paid down. The funds will be deposited to General Fund Miscellaneous Revenues (100-462101). ATTACHMENTS Public Hearing Notice TEFRA Resolution ISF Ativo Holdings LLC Page 3 Packet Pg. 9 1.a NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that at 6:00 p.m., or as soon thereafter as the matter may be heard, on January 28, 2025, at the regular meeting place of the City Council (the "Council') of the City of Santa Clarita (the "City"), City Council Chambers, 23920 Valencia Boulevard, Santa Clarita, CA 91355, a public hearing as required by Section 147(f) of the Internal Revenue Code of 1986 (the "Code"), will be held to consider the proposed issuance of one or more series of bonds, including qualified 501(c)(3) bonds as defined in Section 145 of the Code, for a rental senior living community, from time to time pursuant to a plan of finance, by (1) the California Public Finance Authority ("CalPFA") of its bonds in an aggregate principal amount not to exceed $130,000,000 (the "California Bonds"), and (ii) the Arizona Industrial Development Authority ("AZIDA") of its bonds in an aggregate principal amount not to exceed $170,000,000 (the "Arizona Bonds" and, together with the California Bonds, the "Bonds"). All of the proceeds of the California Bonds and a portion of the proceeds of the Arizona Bonds (in an amount not to exceed $20,000,000) will be used by ISF Ativo Holdings LLC (the `Borrower"), the sole member of which is Integrated Senior Foundation, an organization described in Section 501(c)(3) of the Code, to: (1) finance or reimburse the costs of acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, and/or equipping of a rental senior living community to be located at 16330 Village Way, Santa Clarita, California (the "Facility"); (2) pay certain expenses incurred in connection with the issuance of the Bonds; (3) pay capitalized interest on the Bonds; (4) fund one or more debt service reserves with respect to the Bonds; and (5) fund related working capital costs. The Facility will be owned by ISF Ativo Santa Clarita LLC, the sole member of which is the Borrower. At the hearing, the testimony of all interested persons will be heard. Persons who require accommodation for any audio, visual or other disability in order to participate in a public hearing of the City Council may obtain assistance by requesting such accommodation in writing addressed to the City Clerk, 23920 Valencia Boulevard, Santa Clarita, CA 91355 or telephonically by calling (661) 2554391. Any such request for accommodation should be made at least 48 hours prior to the scheduled meeting for which assistance is requested. If you challenge the proposed action in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice or in written correspondence delivered to the City Council at or prior to the public hearing. The California Bonds, including the principal of (premium, if any) and interest thereon, will not constitute a debt or a loan of credit or a pledge of the full faith and credit or taxing power of the City, CalPFA, the State of California, or any political subdivision thereof, within the meaning of any State of California Constitutional provision or statutory limitation and shall never constitute or give rise to a pecuniary liability of the City, CalPFA, the State of California, or any political subdivision thereof. The California Bonds shall not constitute, directly or indirectly, or contingently obligate or otherwise constitute a general obligation of or a charge against the general credit of the City, CalPFA, the State of California, or any political subdivision thereof, but shall be special limited obligations of CalPFA payable solely from the sources provided for in the proceedings for the issuance of the California Bonds. CalPFA has no taxing power. The Arizona Bonds, including the principal of (premium, if any) and interest thereon, will not constitute a debt or a loan of credit or a pledge of the full faith and credit or taxing power of the City, AZIDA, the Arizona Finance Authority, the State of Arizona, or any political subdivision thereof, within the meaning of any State of Arizona Constitutional provision or statutory limitation and shall never constitute or give rise to a pecuniary liability of the City, AZIDA, the Arizona Finance Authority, the State of Arizona, or any political subdivision thereof. The Arizona Bonds shall not constitute, directly or indirectly, or contingently obligate or otherwise constitute a general obligation of or a charge against the general credit of the City, AZIDA, the Arizona Finance Authority, the State of Arizona, or any political 4149-7401-6852.8 Packet Pg. 10 1.a subdivision thereof, but shall be special limited obligations of AZIDA payable solely from the sources provided for in the proceedings for the issuance of the Arizona Bonds. AZIDA has no taxing power. Dated: January 18, 2025 -2- 4149-7401-6852.8 Packet Pg. 11 1.b RESOLUTION NO. 25- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA, APPROVING THE ISSUANCE BY THE (I) CALIFORNIA PUBLIC FINANCE AUTHORITY OF REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $130,000,000, AND (II) ARIZONA INDUSTRIAL DEVELOPMENT AUTHORITY OF REVENUE BONDS IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $170,000,000, TO BENEFIT ISF ATIVO HOLDINGS LLC AND CERTAIN OTHER MATTERS RELATING THERETO WHEREAS, ISF Ativo Holdings LLC (Borrower), the sole member of which is Integrated Senior Foundation, an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986 (Code), has requested that the California Public Finance Authority (CalPFA) provide for the issuance of its bonds, including qualified 501(c)(3) bonds as defined in Section 145 of the Code, for a rental senior living community, in one or more series issued from time to time, including any bonds issued to refund such bonds, in an aggregate principal amount not to exceed $130,000,000 (California Bonds); and WHEREAS, the Borrower has also requested that the Arizona Industrial Development Authority (AZIDA) provide for the issuance of its bonds, including qualified 501(c)(3) bonds as defined in Section 145 of the Code, for a rental senior living community, in one or more series issued from time to time, including any bonds issued to refund such bonds, in an aggregate principal amount not to exceed $170,000,000 (the Arizona Bonds and, together with the California Bonds, the Bonds); and WHEREAS, the Borrower intends to use all of the proceeds of the California Bonds and a portion of the proceeds of the Arizona Bonds (in an amount not to exceed $20,000,000) to (1) finance or reimburse the costs of acquisition, construction, expansion, remodeling, renovation, improvement, furnishing, and/or equipping of a rental senior living community to be located at 16330 Village Way, Santa Clarita, California (Facility); (2) pay certain expenses incurred in connection with the issuance of the Bonds; (3) pay capitalized interest on the Bonds; (4) fund one or more debt service reserves with respect to the Bonds; and (5) fund related working capital costs (Project); and WHEREAS, the Facility will be owned by ISF Ativo Santa Clarita LLC, the sole member of which is the Borrower; and WHEREAS, the Facility will be located within the City of Santa Clarita (City), and the Project will benefit the City by providing needed housing options (and related support services) for seniors and by promoting the health, safety and general welfare of its residents; and WHEREAS, the City is an Additional Member of CalPFA pursuant to Section 12 of the Joint Exercise of Powers Agreement (Agreement) relating to CalPFA; and WHEREAS, pursuant to Section 147(f) of the Code, the issuance of the California Bonds by CalPFA and the Arizona Bonds by AZIDA must be approved by the City because the Project is located within the territorial limits of the City; and Page 1 of 3 Packet Pg. 12 1.b WHEREAS, the City Council of the City (City Council) is the elected legislative body of the City and is the applicable elected representative under Section 147(f) of the Code; and WHEREAS, pursuant to Section 147(f) of the Code, the City Council has, following notice duly given, held a public hearing regarding the issuance of the Bonds, and now desires to approve the issuance of the California Bonds by Ca1PFA and the issuance of the Arizona Bonds by AZIDA; and WHEREAS, the City Council understands that its actions in holding this public hearing and in approving this resolution do not obligate the City in any manner for payment of the principal, interest, fees or any other costs associated with the issuance of the Bonds, and said City Council expressly conditions its approval of this resolution on that understanding. NOW THEREFORE, the City Council of the City of Santa Clarita, California, does hereby resolve as follows: SECTION 1. The City Council hereby approves the issuance of the California Bonds by Ca1PFA and the issuance of the Arizona Bonds by AZIDA for the purposes of financing the Project. It is the purpose and intent of the City Council that this resolution constitute approval of the issuance of the California Bonds by Ca1PFA and the issuance of the Arizona Bonds by AZIDA for the purpose of Section 147(f) of the Code by the applicable elected representative of the governmental unit having jurisdiction over the area in which the Project is located. SECTION 2. The officers of the City Council are hereby authorized and directed, jointly and severally, to do any and all things and execute and deliver any and all documents, certificates and other instruments which they deem necessary or advisable in order to carry out, give effect to and comply with the terms and intent of this resolution and the financing transaction approved hereby. Any actions heretofore taken by such officers are hereby ratified and approved. SECTION 3. The City Council expressly conditions its approval of this resolution on its understanding that the City shall have no obligation whatsoever to pay any principal, interest, fees or any other costs associated with CalPFA's issuance of the California Bonds and AZIDA's issuance of the Arizona Bonds for the financing of the Project. SECTION 4. The City Council's approval pursuant to this resolution of the issuance of the Bonds does not constitute any other approval by any commission or agency of the City with respect to any other City regulatory or other requirements in connection with the Facility. SECTION 5. This Resolution shall take effect from and after its passage and approval. SECTION 6. The City Clerk shall certify to the adoption of this resolution. PASSED, APPROVED, AND ADOPTED this 28th day of January 2025. Page 2 of 3 Packet Pg. 13 1.b MAYOR ATTEST: CITY CLERK DATE: STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA ) I, Mary Cusick, City Clerk of the City of Santa Clarita, do hereby certify that the foregoing Resolution No. 25- was duly adopted by the City Council of the City of Santa Clarita at a regular meeting thereof, held on the 28th day of January 2025, by the following vote. AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: CITY CLERK Page 3 of 3 Packet Pg. 14